Statistics confirm our worst fears

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A simple thing prompted this inquiry: a recent story by Forbes that we happened upon, in which we encountered the startling news that this year's National Collegiate Athletic Association (NCAA) tournament will cost US businesses billions in lost productivity. The figures come courtesy of consulting outfit Challenger, Gray and Christmas - and Forbes, to its credit, expressed skepticism about them.

This led us to wonder just how much money is lost to enjoyable things that finger-wagging middle-class farts disapprove of, such as smoking, drinking, gambling, overeating, watching sports, and the like. The figures we obtained (about which more below), are staggering.

To get a proper handle on this question, we also calculated the social costs of crime, and the monetary losses to businesses from particular crimes such as computer trespass, insurance fraud, shoplifting, and so on. Finally, we factored in unavoidable, mandatory costs such as federal and state government budgets. We wanted to know just how expensive life really is, and just how badly thoughtless, self-indulgent people are stuffing it up.

It turns out that when we allow for unavoidable costs like crime and taxes, the burden to society of our bad habits and voluntary indulgences pushes the cost of living to a sum that actually exceeds the amount of money in existence. And please note: we have not included the costs of health care for diseases and accidental injuries that are not our fault, or the costs of pensions. No wonder the finger-wagging farts are so worried.

First, the methodology. We felt that it was right to use the statistics as supplied, rather than do our own primary research. After all, we're comparing what's claimed to reality, not reality to reality. And the reality just alluded to comes from the US Federal Reserve, which knows more than anyone about how much money there is. That's what they regulate, after all.

According to the fed's very conservative M-1 metric, there was a total of 1.38 trillion dollars in circulation in January of 2006. But we rejected that measure because it consists of little more than cash, traveler's checks, and checking account balances. (We also rejected the M-3 metric, because it includes barely-liquid assets.)

We decided to go with the fairly generous M-2 metric, which includes M-1, plus savings account balances and mutual fund deposits. This gives us a very reasonable money supply of $6.74 trillion for January 2006 -- basically all the money that we Americans, collectively, have on hand at any given moment.

Now for the unavoidable demands on our money supply: first up, we have a federal budget of $2.2 trillion (and yes, some of it is in circulation, and yes, some of the money supply is left over from paying it, while some will yet be needed to accommodate it. This imprecision is a necessary part of dealing with statistics. The trick to doing statistics like a pro is to press on in spite of any doubts you might have).